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Government dismisses Congress, Centre for Science and Environment charge on crop insurance

The CSE report released few days ago said companies raked in a huge profit of around Rs 10,000 crore as on April 2017 due to low claim reported.

, ET Bureau|
Updated: Jul 24, 2017, 06.50 AM IST
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Congress made the same charge in Parliament last week saying against premium paid to the tune of Rs 16,675 crore during the kharif 2016 season, claims only to the tune of Rs 6,478 crore were paid, bringing "big profits" to private companies.
Congress made the same charge in Parliament last week saying against premium paid to the tune of Rs 16,675 crore during the kharif 2016 season, claims only to the tune of Rs 6,478 crore were paid, bringing "big profits" to private companies.
NEW DELHI: Strongly contesting the charge of the Congress and a report of the Centre for Science and Environment (CSE) that private insurance companies have made huge profits from the PM Crop Insurance Scheme, top government officials told ET that crop insurance claims depended on whether there was a good monsoon or not and taking just one year as a benchmark to assess the scheme's effectiveness was simply not adequate.

The CSE report released few days ago said that companies raked in a huge profit of around Rs 10,000 crore as on April 2017 due to low claim reported in relation to the premium charged. Congress made the same charge in Parliament last week saying against premium paid to the tune of Rs 16675 Cr during the Kharif 2016 season, claims only to the tune of Rs 6478 Cr were paid, bringing "big profits" to private companies.

"As on date, claims of Rs 6478 Cr have been approved for Kharif 2016 season and a sum of Rs 4274 Cr paid. However, total claims for Kharif 2016 are estimated to be over Rs 10000 Cr against the gross premium of Rs 16675 Cr. This needs to be visualised in a situation that saw normal crop seasons in both Kharif and Rabi, 2016-17. It would therefore be wrong, rather preposterous to allege, that the scheme is benefitting private insurance companies," a top government official said, speaking on the condition of anonymity. He stressed that payment claims were higher than the gross premium collected in the years 2014 and 2015, "which were both drought years."

The official emphasised that payout depends on the quantum of crop loss which has direct co-relationship with the spread of monsoon to India. "In a good monsoon year, claims are bound to be on the lower side. Insurance companies could make savings in a good year which can be utilised for payouts in bad seasons. Hence, one year data is not enough to evaluate the effectiveness of the scheme. It would statistically more robust to undertake a comprehensive evaluation of both the framework and quality of implementation of the scheme over data sets garnered from at least 2-3 Kharif and rabi seasons each and Centre will be doing this," the top official said. He said claim percentages were still very high in Karnataka, Gujarat, Rajasthan and UP while the claim amounts had exceeded the total premium collected in Tamil Nadu and Tripura.

The official added that gross premium of Rs 16675 Cr was primarily due to "substantial increase" in sum insured from Rs 1,15,000 Cr in 2015-16 to Rs 2,04,000 Cr in 2016-17 because of equating sum insured with cost of cultivation. While farmers still paid low premiums, the government outgo was higher due to a "conscious decision taken by the Central and state governments in long term interest of farmers", the official said. "Higher sum of insurance will result in more substantive payouts to farmers when they become eligible for claims during the season that turns out to be a bad one. The vulnerability of farmers during periods of natural calamity is more precipitous and the scheme aims precisely to secure farmers against such eventualities," the official said.

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